\documentclass{standalone}

\usepackage{newtxtext,newtxmath}
\usepackage[T1]{fontenc}
\usepackage{tikz}
\usetikzlibrary{decorations.pathreplacing, angles, quotes, shapes, patterns, arrows.meta, bending, positioning}

\begin{document}
        \begin{tikzpicture}[scale=8.5/7]
            \draw[thick] (0,7) node[left]{1} -- (0,0) node[midway, left=25pt, rotate=90, anchor=center]{Low-Ability Incumbents' Reelection Probability $\Bar{\nu}$} node[anchor=north east]{0} -- (7,0) node[midway,below=20pt]{Incumbent's Posterior Expected Ability $\kappa^{y}$} node[right]{1};
            \draw[thick] (0,0) -- (2,0) node[below=5pt]{$\gamma$} -- (2,3.5) -- (4,3.5) -- (4,7) -- (7,7);
            \draw[thick, red, dashed] (0,0.03) -- (4,0.03) node[below=5pt, black]{$\underline{\kappa}$} -- (4,3.5) -- (7,3.5);
            \draw [decorate,decoration = {brace,amplitude=5pt, raise=1pt},thick] (2,0) --  (2,3.5) node[midway, left=7.5pt]{\small $1 - q_{i}$};
        \end{tikzpicture}
\end{document}